Perfect Moment Ltd.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2025 AND 2024

(Unless otherwise indicated, dollar amounts in thousands)

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Nature of operations

Perfect Moment Ltd., a Delaware corporation (“Perfect Moment” or “PML” and, together with its subsidiaries unless the context otherwise requires, the “Company”), is an owner and operator of a luxury fashion brand that offers ski, surf, and activewear collections under the brand name Perfect Moment. The Company’s collections are sold directly to customers.

On February 7, 2024, the company entered into an underwriting agreement with ThinkEquity LLC, as representative (the “Representative”) of the several underwriters identified therein, relating to the Company’s initial public offering (the “IPO”) of 1,334,000 shares of the Company’s common stock, par value $0.0001 per share (see Note 10). The Company previously filed the form of underwriting agreement as an exhibit to the Company’s registration statement on Form S-1, as amended from time to time (File No. 333-274913), which was declared effective by the Securities and Exchange Commission on February 7, 2024. The price per share to the public was $6.00 generating gross proceeds of $8,004. The Company also granted the Underwriters a 45-day option to purchase up to 200,100 additional shares of Common Stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the IPO. The Underwriters did not exercise the over-allotment option.

Basis of presentation

These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and present the consolidated financial position, income (loss), comprehensive income (loss), and cash flows of the Company and its wholly owned subsidiaries. The figures in the notes to the financials are presented in thousands.

References to GAAP issued by the FASB in these accompanying notes to the financial statements are to the Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”). The financial statements have been prepared assuming the Company will continue as a going concern.

Principles of consolidation

These consolidated financial statements include the accounts of Perfect Moment Ltd. and its wholly owned subsidiaries; Perfect Moment Asia Limited (“PMA”), Perfect Moment (UK) Limited (“PMUK”), Perfect Moment USA, Inc. (“PMUSA”), and Perfect Moment TM Sarl (“PMTM”). All significant intercompany balances and transactions have been eliminated in consolidation.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going concern

Through March 31, 2025, the Company has funded its operations with proceeds from the sale of common stock from the initial public offering and the issuance of common stock, alongside existing trade, invoice and shareholder financing arrangements. The Company has incurred recurring losses, including a net loss of $15,939 for the year ended March 31, 2025 and used cash in operations of $9,861 during that period. As of March 31, 2025, the Company had an accumulated deficit of $64,916. These factors raise substantial doubt about the Company’s ability to continue as a going concern for at least twelve months from the date these consolidated financial statements were available to be issued. The Company’s ability to continue as a going concern is dependent upon the management of its expenses and its ability to obtain necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due, and upon profitable operations

The Company’s future capital requirements will depend on many factors, including production costs and planned growth. In order to finance these opportunities and associated costs, it is possible that the Company would need to raise additional financing if working capital is insufficient to support its business needs. While there can be no assurances, the Company intends to raise such capital through additional short-term loan issuances, debt factoring, and additional equity raises. If additional financing is required from outside sources, the Company may not be able to raise it on terms acceptable to it or at all. If the Company is unable to raise additional capital on acceptable terms when needed, its product development , results of operations and financial condition would be materially and adversely affected.

As a result of the above, in connection with the Company’s assessment of going concern considerations in accordance with FASB’s Accounting Standards Update (“ASU”) 2014-15,Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management has determined that the Company’s liquidity condition raises substantial doubt about the Company’s ability to continue as a going concern through twelve months from the date these consolidated financial statements are available to be issued. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

Emerging Growth Company

The Company is expected to be an emerging growth company, as defined in the Jumpstart Our Business Startups (“JOBS”) Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as to those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments in applying the Company’s accounting policies that affect the reported amounts and disclosures made in the consolidated financial statements and accompanying notes. Management continually evaluates the estimates and judgments it uses. These estimates and judgments have been applied in a manner consistent with prior periods and there are no known trends, commitments, events or uncertainties that management believes will materially affect the methodology or assumptions utilized in making these estimates and judgments in these consolidated financial statements. Significant estimates inherent in the preparation of the consolidated financial statements include reserves for uncollectible accounts receivables, realizability of inventory; sales reserves; useful lives and impairments of long-lived assets; realization of deferred tax assets and related uncertain tax positions; classification of convertible preferred stock, classification of warrants, and the valuation of stock-based compensation awards. Actual results may differ from these judgements and estimates under different assumptions or conditions and any such differences may be material.

Seasonality

The Company experiences certain effects of seasonality with respect to its business. The Company generally experiences greater sales during its last three fiscal quarters, primarily driven by ski and outerwear sales being higher during the winter months and the Company’s customers concentrated in the northern hemisphere, and the lowest sales during its first fiscal quarter.

Revenue Recognition

Revenues are recognized when the Company’s performance obligations are satisfied as evidenced by transfer of control of promised goods to customers or consumers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the product. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. For transactions within the Company’s wholesale channel, control generally transfers to the customer upon shipment to, or upon receipt by, the customer depending on the terms of sale with the customer. For inventories sold on consignment to wholesalers, the Company records revenue when the inventory is sold to the third-party customer by the wholesaler. For transactions within the Company’s direct-to-consumer (“DTC”) channel, control generally transfers to the consumer at the time of sale within retail stores and generally upon receipt by the consumer with respect to e-commerce transactions. In certain arrangements the Company receives payment before the customer receives the promised good. These payments are initially recorded as deferred revenue, a contract liability, and recognized as revenue in the period when control is transferred to the customer.

The amount of consideration the Company expects to be entitled to receive and recognize as revenue, net across both wholesale and DTC channels varies with changes in sales returns, other accommodations and incentives offered. The Company estimates expected sales returns and other accommodations, such as chargebacks and markdowns, and records a sales reserve to reduce revenue*.*These estimates are based on historical rates of product returns and claims, as well as events and circumstances that indicate changes to such historical rates are warranted. However, actual returns and claims in any future period are inherently uncertain and thus may differ from estimates. As a result, the Company adjusts estimates of revenue at the earlier of when the most likely amount of consideration the Company expects to receive changes or when the amount of consideration becomes fixed. If actual or expected future returns and claims are significantly different than the sales reserves established, the Company records an adjustment to revenue, net in the period in which it made such determination. As of March 31, 2025 and 2024, the provision for returns was $594 and $298, respectively, and included as a component of accrued expenses on the accompanying consolidated balance sheets.

Partnership revenue is recognized over time based on the greater of contractual minimum guarantees and actual, or estimated, sales of products by the Company’s partners.

The Company may issue merchant credits, which are essentially refund credits. The merchant credits are initially deferred and subsequently recognized as revenue when tendered for payment.

The Company expenses sales commissions when incurred, which is generally at the time of sale, because the amortization period would have been one year or less. These costs are recorded within selling, general and administrative expenses on the accompanying statements of operations and comprehensive loss.

As of March 31, 2025 and 2024, the Company did not have any contract assets and had $264 and $420, respectively, of unearned revenue on the accompanying consolidated balance sheets.

Revenue recognized from contracts with customers is recorded net of sales taxes, value added taxes, or similar taxes that are collected on behalf of local taxing authorities.

For the years ended March 31, 2025 and 2024 revenue, net recognized from performance obligations related to prior periods were not material. Revenue, net expected to be recognized in any future period related to remaining performance obligations is not material.

Disaggregated revenue

The following table disaggregates the Company’s revenue, net by channel and geographic location:

Cost of sales

Cost of sales consists of all direct costs to source and purchase raw materials and finished goods, production costs (including labor), non-refundable taxes, duties, other landing costs, as well as specific provisions for excess, close-out or slow-moving inventory.

Cost of sales also includes freight costs associated with the shipment of goods to the Company’s warehouses and distribution centers, including freight costs associated with the transfer of inventory within the Company’s third-party fulfillment and distribution centers and to the Company’s retail stores.

Selling, general and administrative expenses

Selling, general and administrative expenses consist of personnel-related costs, depreciation and amortization, occupancy, warehousing, professional fees, technology, human resources, legal, and other selling and general operating expenses related to the Company’s business functions. Selling, general and administrative expenses also include costs associated with the handling of inventory and warehousing costs associated with the operation of the Company’s third-party fulfillment and distribution centers.

Marketing and advertising expenses

Marketing and advertising expenses consist of agency, contractor and consulting expense, content production, promotional operating expense, and advertising costs.

Advertising costs, including the costs to produce advertising, are expensed in the period incurred. Total advertising expense was $1,646 and $1,446 for the years ended March 31, 2025 and 2024, respectively.

Cash and cash equivalents and restricted cash

Cash and cash equivalents consist of cash on hand and bank balances with original maturities of three months or less. The Company has not experienced any losses related to these balances, and management believes the Company’s credit risk to be minimal.

Restricted cash consists of cash deposits and certificate of deposits under the Company’s trade finance facility (see Note 8). Restricted cash is classified as current on the accompanying consolidated balance sheets as the trade finance facility can be due on demand.

The Company maintains the majority of cash at Chase or HSBC where the balances are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At times, the cash balances may exceed the FDIC-insured limit. As of March 31, 2025, we do not believe we have any significant concentrations of credit risk due to the strong credit rating of Chase and HSBC. The cash held by other banks is within the FDIC insured amount and cash held by third party payment platforms are short term timing balances.

Accounts receivable and allowance for credit losses

Accounts receivable primarily arise out of sales customers. The allowance for credit losses is an amount equal to the estimated probable losses net of recoveries in accounts receivable using the incurred loss methodology. After considering current economic conditions and specific and financial stability of its customers, an allowance for credit losses is maintained in the consolidated balance sheet at a level which management believes is sufficient to cover all probable future credit losses as of the balance sheet date based on specific reserves and an expectation of future economic conditions that might impact collectability. Accounts receivable are carried net of allowances for credit losses as of March 31, 2025 and 2024. After all reasonable attempts to collect a receivable have failed, the amount of the receivable is written off against the allowance. As of March 31, 2025 and 2024, the Company had $547 and $558, respectively, in allowances for credit losses.

Concentration of credit risk:

Supplier

In the years ended March 31, 2025 and 2024, the largest single supplier of the Company’s manufactured goods produced 39% and 75%, respectively, of the company’s products. In the years ended March 31, 2025 and 2024, the largest fabric supplier supplied 82% and 79%, respectively, of the fabric used to manufacture the Company’s products.

Customer

For the years ended March 31, 2025 and 2024, we had individual customers that accounted for approximately 12% and 13%, respectively, of total revenue, net. These customers individually did not comprise more than 10% of total accounts receivable as of March 31, 2025 and 2024.

As of March 31, 2025 and 2024, two customers accounted for approximately 27% of total accounts receivable. These customers did not comprise individually more than 10% of total revenues during the years ended March 31, 2025 and 2024.

Inventories, net

Inventories, consisting of finished goods, inventories in transit, and raw materials, are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis, and includes all costs incurred to deliver inventory to the Company’s third-party fulfillment and distribution centers, including freight, non-refundable taxes, duty and other landing costs.

The Company periodically reviews its inventories and makes a provision as necessary to appropriately value goods that are obsolete, have quality issues, or are damaged. The amount of the provision is equal to the difference between the cost of the inventory and its net realizable value based upon assumptions about product quality, damages, future demand, selling prices, and market conditions. If changes in market conditions result in reductions in the estimated net realizable value of its inventory below its previous estimate, the Company would increase its provision in the period in which it made such a determination.

In addition, the Company provides for inventory shrinkage based on historical trends from actual physical inventory counts. Inventory shrinkage estimates are made to reduce the inventory value for lost or stolen items. The Company performs physical inventory counts and cycle counts throughout the year and adjusts the shrink provision accordingly.

Prepaid and other current assets

Amounts recorded in prepaid and other current assets consist of employee advances, unbilled accounts receivable, prepaid insurance, and other current assets, all of which are expected to be realized within one year from the reporting period.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Cost of property and equipment consists of purchase price, conversion cost and estimated cost of dismantling and restoration. Expenditures such as repairs and maintenance, overhaul costs and borrowing costs are expensed as incurred. Expenditures that extend the useful life of an asset are capitalized. Direct internal and external costs related to software used for internal purposes and website development which are incurred during the application development stage or for upgrades that add functionality are capitalized. All other costs related to internal use software are expensed as incurred. Property and equipment carrying values are reviewed for impairment when events or circumstances indicate that the asset group to which the property and equipment belong might be impaired.

The following estimated useful lives are used for to depreciate property and equipment on a straight-line basis:

Convertible preferred stock:

Convertible preferred stock consists of preferred stock shares issued with an option to convert into shares of common stock at the option of holders. The convertible preferred stock are accounted for as permanent equity in the scope of ASC 815,Derivatives and Hedging(“ASC 815”) and recorded at fair value which is representative of the proceeds received (see Note 10).

Warrants

We evaluate the appropriate balance sheet classification of warrants we issue as either equity or as a derivative liability. In accordance with ASC 815, we classify a warrant as equity if it is “indexed to the Company’s equity” and meets several specific conditions for equity classification. A warrant is not considered “indexed to the Company’s equity,” in general, when it contains certain types of exercise contingencies or potential adjustments to its exercise price. If a warrant is not indexed to the Company’s equity or it has net cash settlement provisions that result in the warrants being accounted for under ASC 480,Distinguishing Liabilities from Equity(“ASC 480”) or ASC 815, it is classified as a derivative liability which is carried on the consolidated balance sheets at fair value with any changes in its fair value recognized in the statements of operations and comprehensive loss. At March 31, 2025 and 2024 all of the Company’s outstanding warrants were classified as equity.

Leases

The Company determines if an arrangement is or contains a lease at contract inception, recording a lease liability and corresponding right-of-use asset at lease commencement for identified leases at the lease commencement date, which is generally when the Company takes possession of the asset. Lease agreements may contain adjustments to lease payments based on fixed escalation clauses, an index or a rate. Lease agreements may also require the Company to pay real estate taxes, insurance, common area maintenance, and other costs, collectively referred to as operating costs, in addition to lease payments. Lease agreements also may contain lease incentives, such as tenant improvement allowances and rent holidays. Lease agreements can include one or more options to renew or extend the initial lease term. The exercise of a lease renewal option is generally at the Company’s sole discretion. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants

The lease liability is initially measured at the present value of the minimum fixed lease payments over the expected lease term, which includes options to extend or terminate the lease agreement when it is reasonably certain those options will be exercised, using the Company’s discount rate as of lease commencement. Minimum fixed lease payments are discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company cannot determine the interest rate implicit in the lease because it does not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs. Therefore, the Company generally uses its incremental borrowing rate as the discount rate for the lease. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. Because the Company does not generally borrow on a collateralized basis, it uses market-based rates as an input to derive an appropriate incremental borrowing rate, adjusted for the lease term and the effect on that rate of designating specific collateral with a value equal to the unpaid lease payments for that lease.

The Company has elected the practical expedient to account for the lease and non-lease components as a single lease component. Therefore, minimum lease payments used to measure the lease liability include all of the fixed consideration in the contract.

Variable lease payments associated with the Company’s leases are recognized upon the occurrence of the event, activity, or circumstance in the lease agreement on which those payments are assessed. Variable lease payments are presented in the accompanying consolidated statements of operations and comprehensive loss in the same line item as expense arising from fixed lease payments, which is generally within selling, general and administrative expenses.

Leases with an initial term of 12 months or less are considered short-term leases and not recorded on the accompanying consolidated balance sheets. The Company recognizes lease expense for short-term leases on a straight-line basis over the lease term in the same line item as expense arising from fixed lease payments, which is generally within selling, general and administrative expenses.

Long-Lived Assets

Long-lived assets held for use are evaluated for impairment when the occurrence of events or a change in circumstances indicate that the carrying value of the assets may not be recoverable. In these cases, the Company estimates the future undiscounted cash flows to be derived from the asset or asset group to determine whether the asset or asset group is recoverable. If the carrying value of an asset or asset group exceeds the estimated undiscounted future cash flows, an analysis is performed to estimate the fair value of the asset or asset group. An impairment is recorded if the fair value of the asset or asset group is less than the carrying amount.

Impairment charges of long-lived assets, if any, are classified as selling, general and administrative expenses on the accompanying consolidated statements of operations and comprehensive loss. The Company did not record impairment losses for the years ended March 31, 2025 and 2024.

Income Taxes

The Company is required to estimate its income taxes in each of the jurisdictions in which it operates as part of preparing the consolidated financial statements. This involves estimating the actual current tax in addition to assessing temporary differences resulting from differing treatments for tax and financial accounting purposes. These differences, together with net operating loss carryforwards and tax credits, are recorded as deferred tax assets or liabilities on the Company’s consolidated balance sheet. Deferred income tax assets and liabilities are measured using enacted tax rates, for the appropriate tax jurisdiction, which are expected to be in effect when these differences are anticipated to reverse.

A judgment must then be made of the likelihood that any deferred tax assets will be recovered from future taxable income. A valuation allowance may be required to reduce deferred tax assets to the amount that is more likely than not to be realized. In the event the Company determines that it may not be able to realize all or part of its deferred tax asset in the future or that new estimates indicate that a previously recorded valuation allowance is no longer required, an adjustment to the deferred tax asset is charged or credited to income in the period of such determination.

The Company recognizes tax positions that meet a “more likely than not” minimum recognition threshold. If necessary, the Company recognizes interest and penalties associated with tax matters as part of the income tax provision and would include accrued interest and penalties with the related tax liability in the consolidated balance sheets.

Foreign currency

The Company’s reporting currency is the U.S. Dollar (“USD”). The functional currency for each entity included in these consolidated financial statements is the applicable local currency of each entity. The Company’s entities domiciled in the United States, United Kingdom, Hong Kong and Switzerland maintain their books and records in their local currencies, which are USD, Great Britain Pound (“GBP”), Hong Kong Dollar (“HKD”) and Swiss Franc (“CHF”), respectively. For each entity whose functional currency is not the USD, assets and liabilities are translated into USD using the exchange rate in effect on the balance sheet date and revenue and expenses are translated into USD on a monthly basis using the average rate in effect for that month. Translation gains and losses are recorded as a foreign currency translation adjustment as a component of other comprehensive loss, which is a component of accumulated other comprehensive loss on the accompanying consolidated balance sheets.

Pursuant to US GAAP, assets and liabilities of the Company’s foreign operations with functional currencies other than the USD are translated at the exchange rate in effect at the balance sheet date, while revenues and expenses are translated at average rates prevailing during the periods. Translation adjustments are reported in accumulated other comprehensive loss, a separate component of stockholders’ equity. Cash flows are also translated at average translation rates for the periods; therefore, amounts reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

We used theexchange rates in the following table to translate amounts denominated in non-USD currencies as of and for the periods noted:

Stock-based compensation

Share-based compensation cost is estimated at the grant date based on the award’s fair value. For stock options, time-based restricted stock units, and market-based restricted stock units, share-based compensation cost is recognized over the expected requisite service period using the straight-line attribution method. For equity-classified market-based restricted stock units, the probability of achieving the related market condition is incorporated into the grant date fair value. If targets are not met, no compensation cost will be reversed except in the case of award forfeitures. For performance-based restricted stock units, share-based compensation cost is recognized based on the Company’s assessment of the probability of achieving the related performance targets. If such targets are not met, no compensation cost is recognized and any previously recognized compensation cost is reversed. The Company estimates forfeitures for share-based awards granted, but which are not expected to vest.

The inputs into the Black Scholes option pricing model are subjective and generally require significant judgment. Prior to going public, the fair value of the shares of common and preferred stock has historically been determined by the Company’s management with the assistance of third-party specialists as there was no public market for the common stock up until February 8, 2024. The fair value is obtained by considering a number of objective and subjective factors, including the valuation of comparable companies, sales of preferred stock to unrelated third parties, projected operating and financial performance, the lack of liquidity of common and preferred stock and general and industry specific economic outlook, amongst other factors. The expected term represents the period that the Company’s stock options are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) as the Company’s stock option exercise history does not provide a reasonable basis upon which to estimate expected term. Because the Company was privately held for a portion of the periods covered by these financial statements and historically did not have an active trading market for its common and preferred stock for a sufficient period of time, the expected volatility was estimated based on the average volatility for comparable publicly traded companies, over a period equal to the expected term of the stock option grants. The Company listed on NYSE American on February 8, 2024 and now uses the closing price on the day of grant to determine FMV and for the stock options issued in Q3 2025 the company used the average of a peer group of similar companies based by one or all the following factors to determine volatility: industry, revenue, market capitalization. The risk-free rate assumption is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option. The Company has never paid dividends on its common stock and does not anticipate paying dividends on common stock in the foreseeable future.

Comprehensive loss

Comprehensive loss includes net loss as well as other changes in shareholders’ deficit that result from transactions and economic events other than those with shareholders. For the year ended March 31, 2025, these changes related to foreign currency translation gains and losses. There were no reclassifications out of comprehensive loss for the years ended March 31, 2025 and 2024.

Loss per share of common stock

Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding plus the number of additional shares of common stock that would have been outstanding if all dilutive potential shares of common stock had been issued using the treasury stock method. Potential shares of common stock are excluded from the computation when their effect is antidilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net income per share if the exercise prices were lower than the average fair market value of common stock during the reporting period.

Potentially dilutive stock options and securities as presented in the table below were excluded from the computation of diluted net income (loss) per share, because the effect would be anti-dilutive. As the Company incurred losses in the years ended March 31, 2025 and 2024, basic and diluted weighted-average shares are the same in the loss per share calculation, in accordance with ASC 260-10-45-20.

Fair Value of Financial Instruments

ASC 820,Fair Value Measurements and Disclosures (“ASC 820”), clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Assets and liabilities measured at fair value are based on one or more of the following techniques noted in ASC 820:

The Company believes its valuation methods are appropriate and consistent with other market participants, however the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The carrying amount of the Company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, accounts payable, accrued expenses and operating lease liabilities approximate their fair value due to their short-term nature or expected settlement date of these instruments. The carrying values of debt obligations approximate their fair values due to the fact that the interest rates on these obligations are based on prevailing market interest rates. The Company does not have financial instruments measured at fair value on a recurring basis as of March 31, 2025 and 2024.

It is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.

Segment Reporting

ASC 280,Segment Reporting (“ASC 280”), defines operating segments as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s chief financial officer and chief creative officer collectively perform the function that allocates resources and assesses performance, and thus together, serve as the Company’s CODM. The CODM reviews the assets, operating results, and financial metrics for the Company as a whole to make decisions about allocating resources and assessing financial performance. Accordingly, management has determined that there is only one reportable segment. The CODM assesses performance for the single reportable segment and decides how to allocate resources based on net loss. The measure of segment assets is reported on the balance sheet as total assets.

Reclassifications

Certain prior period presentation and disclosures were reclassified to ensure comparability with current period presentation. Specifically, costs associated with packaging services, warehousing services and merchant fees we reclassified from cost of sales to selling, general and administrative expenses for the year ended March 31, 2025. Accordingly, the Company reclassified $3,211 of cost of sales to selling, general and administrative expenses on the accompanying consolidated statements of operations and comprehensive loss for the year ended March 31, 2024 to conform to the current period presentation. The reclassifications have not changed the results of operations of the prior period.

Recent Accounting Pronouncements, adopted

ASU 2023-07,Segment Reporting: Improvements to Reportable Segment Disclosure (“ASU 2023-07”) expands public entities’ segment disclosures primarily by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments are required to be applied retrospectively to all prior periods presented in an entity’s financial statements. The Company adopted the guidance effective March 31, 2025 for the fiscal year beginning April 1, 2024. There was no impact on the Company’s reportable segments identified and additional required disclosures have been included in these financial statements (see Note 16, Segment Reporting).

Recent Accounting Pronouncements, not yet adopted

ASU 2024-01,Compensation-Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards (“ASU 2024-01”) introduces updates to accounting standards related to the classification and measurement of financial instruments under ASC 320. The update primarily focuses on clarifying guidance for equity securities, debt instruments, and other financial assets, particularly in the areas of fair value measurement and impairment recognition. It aims to improve consistency and comparability in the reporting of financial instruments by refining the criteria for classifying securities and enhancing the methodology for recognizing and measuring impairments. ASU 2024- 01 also mandates additional disclosures to provide greater transparency around the valuation techniques and assumptions used in determining the fair value of financial instruments. The update is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its financial statements and disclosures.

ASU 2024-02,Codification Improvements-Amendments to Remove References to the Concepts Statements (“ASU 2024-02”) updates accounting standards for revenue recognition, lease accounting, and impairment of long-lived assets. ASU 2024-02 provides enhanced guidance for estimating variable consideration, accounting for contract modifications, determining lease terms, and simplifying impairment testing for long-lived assets. It also introduces increased disclosure requirements for financial instruments and derivatives. ASU 2024-02 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. ASU 2024-02 is not expected to have a material effect on the Company’s financial statements

ASU 2024-03,Disaggregation of Income Statement Expenses (“DISE”) (“ASU 2024-03”) requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosure about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its financial statements and disclosures.

ASU 2023-06,Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative(“ASU 2023-06”) incorporates several disclosure and presentation requirements currently residing in SEC Regulation S-X and S-K into the ASC. The amendments are applied prospectively and are effective when the SEC removes the related requirements from Regulation S-X and S-K. Any amendments the SEC does not remove by June 30, 2027 will not be effective. Early adoption is prohibited. The Company is currently evaluating the impact of this ASU on its financial statements and disclosures.

ASU 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), include amendments that further enhance income tax disclosures, primarily through disaggregation of specific rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024, with early adoption permitted, and may be applied prospectively or retrospectively. The Company is currently evaluating the impact of this ASU to determine the impact on the Company’s disclosures.

ASUs recently issued but not listed above were assessed and determined to be either not applicable or are expected to have minimal impact on the consolidated financial position or results of operations.

3. INVENTORIES, NET

The following table details the primary categories of inventories for the periods presented.

4. PREPAID AND OTHER CURRENT ASSETS

The following table details the primary categories of prepaid and other current assets for the periods presented.

5. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following for the periods presented:

Depreciation expense related to property and equipment was $342 and $555 for the years ended March 31, 2025 and 2024, respectively, and is included as a component of selling, general and administrative expenses on the accompanying consolidated statements of operations and comprehensive loss.

6. LEASES

The Company has obligations under operating leases for its offices. As of March 31, 2025 and 2024, the remaining lease terms of the various leases are less than 24 months. The majority of the Company’s leases include renewal options at the sole discretion of the Company. In general, it is not reasonably certain that lease renewals will be exercised at lease commencement and therefore lease renewals are not included in the lease term.

The following table details the Company’s net lease expense. The lease expenses include contingent rent payments and other non-fixed lease related costs, including common area maintenance, property taxes, and landlord’s insurance.

Rent expense for the fiscal years ended March 31, 2025 and 2024 was $894 and $479, respectively (including short term and other rentals).

7. ACCRUED EXPENSES

The following table details the primary categories of accrued expenses for the periods presented.

8. DEBT

Short-Term Borrowings

During the year ended March 31, 2025, the Company entered into seven separate business loan and security agreements (the “Term Loans”) with a lender for short-term loans to be provided by the lender, or the lender’s assignees (collectively, the “Lenders”) and mature 30-weeks from the date the amounts are borrowed. No amount of repaid borrowings may be reborrowed. The Company borrowed under seven short-term borrowing arrangements during the year ended March 31, 2025, borrowing a gross amount of $8,658, net of fees of $2,866 which was recorded as a debt discount and is being amortized over the term of the agreement. During the year under March 31, 2025, the Company made total repayments of $5,742. The company amortized $1,801 of the debt discount to interest expense and realized a cancelled debt discount of $179 related as an early payment discount of the notes for the same amount resulting unamortized debt discount balance of $887. As of March 31, 2025, the Company had outstanding borrowings of $2,738 and an unamortized debt discount of $887, resulting in net balance of $1,851.

As of March 31, 2025, the Company has outstanding borrowings under four agreements that require weekly payments of principal and interest totaling $53, $34, $71, and $59 which have a remaining term of one week, eight weeks, thirteen weeks, and twenty-seven weeks, respectively. If an event of default, as defined in the agreement, occurs, the Company must make a mandatory prepayment to the Lenders in an amount equal to the sum of (i) all outstanding principal plus accrued and unpaid interest and (ii) a prepayment fee equal to the amount of interest that would be paid through the maturity date (the “Prepayment Fee”) plus (iii) all other obligations that are due and payable, including increased interest of 5.0%.

The Company has the right to make a full or partial prepayment of any or all obligations, but is obligated to pay a make-whole payment equal to the Prepayment Fee.

Use of proceeds is limited to the repayment of other obligations to one of the Lenders and for general business requirements. The term loans are secured by collateral of the company that consists of all properties, rights and assets of the Company.

Trade Finance Facility

The Company, through PMA, has a trade finance facility extended on goods for which letters of credit are issued to the Company’s suppliers by a financial institution that matures in June 2025. The trade facility agreement was entered into in June 2022 and subsequently amended since with the most recent amendment in August 2024. As of March 31, 2025 and 2024, the outstanding balance under the trade finance facility was $2,495 and $0, respectively, and the Company had a limit on the trade finance facility of $2,700 and $5,000, respectively. As of March 31, 2025, there wereno outstanding pledged letters of credit by HSBC. The Company is permitted to draw on the trade finance facility agreement to the extent that there is a deposit made to a specified account with the financial institution.

The trade finance facility, as amended in August 2024, provides for (a) import facilities up to $2,700 and $5,000 as of March 31, 2025 and 2024, respectively, with repayment due 120-days from the draw, and (b) post-shipment buyer loans up to $1,800 and $800 as of March 31, 2025 and 2024, respectively, with repayment due 90-days from the draw. The Company’s ability to draw on the trade finance facility is subject to terms per the agreement, which include verification that the Company received the products from suppliers, among other requirements. The financial institution reserved the right to demand repayment at any time. A commission fee equal to 0.25% and 0.0625% will be charged on the first $50 and balances in excess of $50 respectively, drawn under the trade finance facility.

For drawings in Hong Kong dollars, the interest rate equals the Hong Kong Interbank Offered Rate (“HIBOR”) plus 3.0% (6.72% at March 31, 2025), and for drawings in U.S. dollars, the interest rate equals the Secured Overnight Financing Rate (“SOFR”) plus 3.3% (7.71 % at March 31, 2025).

As of March 31, 2025, the trade finance facility was secured by a personal guarantee of $4,000 from the chairman of the Company’s board of directors and a requirement for a cash deposit from PMA equal to 50.0% of the limit of the trade finance facility, or $1,350. As of March 31, 2025, the cash deposit associated with the trade finance facility agreement was $1,350 and is recorded as restricted cash on the accompanying consolidated balance sheets.

The $2,495 outstanding under the trade finance facility as of March 31, 2025 was repaid in full during June 2025.

9. CONVERTIBLE DEBT OBLIGATIONS

2021 and 2022 Debt Financings

In March 2021, the Company entered into an arrangement whereby the Company completed convertible debt financing (“2021 Debt Financing”), from 47 investors, for gross proceeds of $6,000, less $841 of debt issuance costs, at an 8.0% interest rate to provide working capital for its operations. Between April and July 2022, the Company received further convertible debt financing (“2022 Debt Financing”) from 47 investors for gross proceeds of $4,000, less $531 of debt issuance costs, that rank pari passu to the 2021 Debt Financing, at an 8.0% interest rate. The debt issuance costs were amortized over the life of the convertible debt. The Company’s convertible debt obligations are secured by a security interest over the assets of the Company.

The 2021 Debt Financing had a maturity date of December 15, 2023. In December 2023 and January 2024, the maturity date of all convertible promissory notes was extended to February 14, 2024. Upon the closing of an IPO, prior to the redemption date, the convertible debt was convertible into the Company’s common stock at a conversion price equal to 80% of the public offering price of the Company’s common stock in the IPO.

On February 12, 2024, $10,002 in principal amount plus accrued interest in the amount of $1,985 automatically converted into the Company’s common stock, at 80% of the initial public offering price into an aggregate of 2,497,267 shares of common stock (see note 10). Upon conversion of the convertible debt, the unamortized balance of debt discount of $492 was charged to interest expense.

2024 Debt Financing

In December 2024, the Company entered into a convertible secured promissory note (“2024 Debt Financing”) whereby the Company completed convertible debt financing (“2024 Debt Financing”), from one investor, for gross proceeds of $2,000, to provide working capital for its operations. The Company’s convertible debt obligations are secured by a security interest over the assets of the Company. The 2024 Debt Financing matures on December 6, 2025. The 2024 Debt Financing has the following features:

*Conversion rights -*The investor has the right, but not the obligation, to convert any portion of the outstanding and unpaid principal and accrued interest into shares of common stock at the conversion price of $1.00.

Interest– The 2024 Debt Financing bears interest of 15.0% per annum.

Exchange Cap – The lender shall not have the right to convert any portion of the 2024 Debt Financing to the extent that after giving effect to such conversion the lender, together with any affiliate, would beneficially own in excess of 4.99% (which may be increased to 9.99% at the investor’s sole discretion) of the number of common shares outstanding immediately after giving effect to such conversion or receipt of shares as payment of interest. Additionally, the Company shall not issue any common shares upon conversion of the 2024 Debt Financing, or otherwise, if the issuance of such common shares would exceed the aggregate number of common shares that the Company may issue in a transaction in compliance with the Company’s obligations under the rules or regulations of the NYSE, unless approved by the Company’s stockholders.

Event of default – the unpaid principal amount of the 2024 Debt Financing and any accrued but unpaid interest becomes immediately due in payable if an Event of Default, as defined in the 2024 Debt Financing occurs. The investor has the right, but not the obligation, to convert at any time after an Event of Default at the conversion price of $1.00.

Prepayment feature - A prepayment prior to maturity to repay amounts outstanding under the 2024 Debt Financing is required equal to 33% of net proceeds of an offering up to $10,000 of preferred stock after the first $2,000 in net proceeds.

In March 2025, $2,000 in principal converted into an aggregate 2,000,000 shares of the Company’s common stock, at a conversion price of $1.00 (see Note 10). At the time of conversion, accrued but unpaid interest was of $93 included in the balance of accrued expenses in the accompanying consolidated balance sheet as of March 31, 2025, which was subsequently paid in cash to the lender.

10. STOCKHOLDERS’ EQUITY

The Company is authorized to issue 110,000,000 shares of stock, of which 100,000,000 is designated as common stock and 10,000,000 is designated as preferred stock.

Common stock

The Company is authorized to issue 100,000,000 shares of common stock with a par value of $0.0001 per share, of which 19,291,000 and 15,653,449 were issued and outstanding as of March 31, 2025 and 2024, respectively.

Sale of common stock from private placement

During May to August 2023, the Company issued 409,050 shares of common stock at a par value of $0.0001 and a purchase price of $6.00 per share. The total net proceeds were $2,179, net of broker fees and expenses. The holders of the common stock shall be entitled to cast one vote for each share held at all stockholder meetings and have no right to subscribe to or purchase any new or additional issue of shares.

Shares and Warrants Issued as Part of the Company’s Underwritten Public Offering

On February 7, 2024, the company entered into an underwriting agreement with ThinkEquity LLC, as representative (the “Representative”) of the several underwriters identified therein, relating to the Company’s initial public offering (the “IPO”) of 1,334,000 shares of the Company’s common stock, par value $0.0001 per share. The Company previously filed the form of underwriting agreement as an exhibit to the Company’s registration statement on Form S-1, as amended from time to time (File No. 333-274913), which was declared effective by the Securities and Exchange Commission on February 7, 2024. The price per share to the public was $6.00 generating gross proceeds of $8,004. On February 12, 2024, the Company consummated the IPO and issued 1,334,000 shares of Common Stock for aggregate net proceeds of approximately $6,009, after deducting underwriting discounts and commissions and estimated offering expenses.

Series A and Series B Convertible Preferred Stock

On February 12, 2024, all outstanding shares of our Series A convertible preferred stock and the Series B convertible preferred stock were automatically converted into 5,323,782 and 1,189,998, respectively, shares of common stock in connection with the closing of the initial public offering.

Series AA Preferred Stock

In March 2025, the Company designated a series of preferred stock as the 12.00% Series AA Convertible Preferred Stock, par value of $0.0001 per share (the “Series AA Preferred Stock”) and authorized 1,800,000 shares of Series AA Preferred Stock.

In March 2025, the Company entered into securities purchase agreements with twelve investors whereby the Company issued 924,921 shares of Series AA Preferred Stock at an original issue price of $5.8005 per share for gross proceeds of $5,365, less $217 of issuance costs or total net proceeds of $5,148. In connection with the securities purchase agreements, the Company entered into a registration rights agreement with the investors whereby the Company committed to file the registration statement to register for resale the shares of common stock issuable upon conversion of the Series AA Preferred Stock purchased by the investors pursuant to the securities purchase agreements no later than thirty days from the final closing date. Registration statement was filed on March 6, 2025

Additionally, the Company entered into a placement agency agreement with a placement agent in exchange for a cash fee of 6.0% of the gross proceeds paid by investors introduced to the Company by the placement agent. Additionally, the Placement Agent received 56,676 warrants to purchase shares of common stock equal to 5.0% of the shares of common stock issuable upon conversion of the Series AA Preferred Stock purchased by these investors (the “March 2025 Warrant”) at a per share price of $1.45 for a term offive years that may be exercised on a cash or cashless basis (see Note 12).

The Series AA Preferred Stock holder and the March 2025 Warrant holder (collectively, the “March 2025 Investors”) shall not have the right to convert any portion of the Series AA Preferred Stock or March 2025 Warrant to the extent that after giving effect to such conversion the March 2025 Investors, together with any affiliates, would beneficially own in excess of 4.99% (which may be increased to 9.99% at the March 2025 Investor’s sole discretion) of the number of common shares outstanding immediately after giving effect to such conversion. Any increase to the beneficial ownership limitation will not be effective until the 61st day after notice is received by the Company.

The March 2025 Warrant was determined to be an equity classified warrant and fair value was calculated as $31 using the Black-Scholes option-pricing model with the following assumptions: volatility of 55.0%, risk-free rate of 3.98%, annual dividend yield of 0.0% and expected life offive years.

The rights, preferences, privileges and restrictions for the Series AA Preferred Stock are as follows:

*Dividends:*Dividends on the Series AA Preferred Stock accrue daily and will be cumulative from the first day of the calendar month in which they are issued, and shall be payable monthly in arrears on the 30th day of each calendar month, when, as and if declared by the board of directors, at the rate of 12.0% per annum of its original issue price, which is the equivalent to $0.6961 per annum per share.

Liquidation preference: Upon (i) a liquidation or winding up of the Company, or (ii) a reorganization, merger or consolidation in which the holders of the voting securities of the Company do not retain at least a majority of the total outstanding voting securities, or (iii) a sale, lease, transfer, exclusive license or other disposition of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, the holders of Series AA Preferred Stock are entitled to receive a preferential payment per share equal to the greater of(a) $5.8005 plus declared but unpaid dividends, or (b) the amount per share that would have been payable had all shares of Series AA Preferred Stock been converted into Common Stock immediately prior to such event.

*Conversion:*Shares of Series AA Preferred Stock are convertible into shares of common stock at the option of the holder, according to a conversion ratio equal to the original issue price of $5.8005 divided by the conversion price of $1.1601, or $5.00. The conversion price is subject to adjustment from time to time as specified in the March 2025 Certificate of Designation.

Shares of Series AA Preferred Stock are convertible into shares of common stock automatically any time after the date six months after the original issuance date if the closing price of the common stock equals or exceeds 200.0% of the original issuance price, or $11.601, and the average trading column of the common stock exceeds 200,000 shares for at least twenty trading days in a period of thirty consecutive trading days.

*Redemption:*The Series AA Preferred Stock are not redeemable at the option of the holder, on either a contingent or non-contingent basis.

*Voting:*The Series AA Preferred Stock are non-voting in Company matters, with the exception that Series AA Preferred Stock holders are required to approve (i)any amendment, or other change, to the Company’s articles of incorporation that would have an adverse impact to the Series AA Preferred Stock holders dividend rights, preferences or special rights and (ii) any increase to the authorized number of shares of Series AA Preferred Stock, or authorize or issuance shares of any class or series of Senior Stock or Parity Stock, both of which are defined in the March 2025 Certificate of Designation.

The Series AA Convertible Preferred Stock has no stated maturity, is not subject to any sinking fund, and will remain outstanding indefinitely unless a holder chooses to convert the Series AA Preferred Stock into shares of our common stock, or we elect to automatically convert it into shares of our common stock. As of March 31, 2025, the Series AA Convertible Preferred Stock were convertible into 4,624,620 common shares.

Shares Issued for Services

During the year ended March 31, 2025, the Company issued 1,352,102 shares of restricted common stock to vendors for services rendered and to be rendered with a fair value of $1,488. These shares of common stock were valued based on the market value of the Company’s common stock price at the issuance date or the date the Company entered into the agreement related to the issuance. During the year ended March 31, 2025, the Company amortized $910 of the value of the shares as the services were rendered and $578 of the remaining fair value of the shares was included as a prepaid asset as of March 31, 2025 (see Note 4).

11. STOCK-BASED COMPENSATION PLANS

The Company maintains the 2021 Equity Incentive Plan (the “2021 Plan”), which provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and performance units and performance shares to employees, directors and consultants of the Company or any parent or subsidiary of the Company. The purpose of the 2021 Plan is to enable the Company to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors and consultants of the Company or any parent or subsidiary of the Company, and to promote the success of the Company’s business. The Company has 2,519,750 unallocated shares available to grant from the 2021 Plan as of March 31, 2025. The Company has historically granted stock options to non-employees in exchange for the provision of services, both under the 2021 Plan and outside of the 2021 Plan.

The Company has granted stock options and time-based restricted stock units (“time-based RSUs”). Stock options granted to date generally have a four-year vesting period and vest at a rate of 25% each year on the anniversary date of the grant. Stock options generally expire on the earlier often years from the date of grant, or a specified period of time following termination. Time-based RSUs generally vest over a period offour years in accordance with the terms and conditions established by the board of directors, and are based on continued service.

Time-based RSUs

The fair value of time-based RSUs is determined using the closing price of the Company’s common stock on the date of grant, reduced by the present value of dividends not received during the vesting period. For the time-based RSUs granted during the years ended March 31, 2025 and 2024, the expected annual dividend yield was 0.0%.

A summary of time-based RSU activity is presented below:

The total stock compensation expense recognized related to vesting of time-based RSUs for the years ended March 31, 2025 and 2024, was $619 and $429, respectively, and was recognized on the accompanying consolidated statements of operations as a component of selling, general and administrative expenses. As of March 31, 2025, the total unrecognized stock-based compensation for time-based RSUs totaled $530 and are expected to be recognized over a weighted average period of 3.7 years.

Stock Options

The fair value of the share option awards was estimated using the Black-Scholes method using the closing price of the Company’s common stock on the date of grant based on the following weighted-average assumptions:

A summary of stock option activity is presented below:

The total stock compensation expense recognized related to vesting of stock options for the years ended March 31, 2025 and March 31, 2024 was $715 and $310, respectively, and was recognized on the accompanying consolidated statements of operations as a component of selling, general and administrative expenses. As of March 31, 2025 the total unrecognized stock-based compensation for stock options was $1,035 and is expected to be recognized over a weighted average period of 2.85 years.

12. WARRANTS

In connection with the IPO (see Note 1) and the securities purchase agreement (see Note 10), the Company issued stock purchase warrants to certain investors that permit the investor to acquire a fixed amount of shares of common stock at a per share price that ranges between $1.45 and $7.50 for a five year term that may be exercised on a cash or cashless basis.

Concurrently with the closing of the IPO, the Company also issued warrants to purchase up to 66,700 shares of Common Stock to the Representative and its designees, at an exercise price of $7.50 per share (the “Underwriter Warrants”). The Underwriter Warrants are exercisable beginning on August 5, 2024, and expire on February 7, 2029.

All issued warrants were determined to be equity-classified at issuance, and as such, were recorded to additional-paid-in capital at such time.

The following table summarizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding at March 31, 2025:

The following table summarizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding at March 31, 2024:

A summary of warrant activity for the periods presented is as follows:

The Underwriter Warrants will expire on February 12, 2029 (see Note 10) and the March 2025 Warrants will expire on March 31, 2030 (see Note 10). As of March 31, 2025 the intrinsic value of the outstanding warrants was $8.

13. INCOME TAXES

Components of income tax (benefit) expense were as follows:

The following is a reconciliation of the federal statutory rate to the Company’s effective income tax rate:

The tax effects of temporary cumulative differences which give rise to deferred tax assets and liabilities are summarized as follows:

During the years ended March 31, 2025 and 2024, the Company recorded an increase in the valuation allowance of $3,190 and $1,449, respectively, related to federal deferred tax assets. Deferred tax assets are recorded related to net operating losses and temporary differences between the book and tax bases of assets and liabilities expected to produce tax deductions in future periods. The realization of these assets depends on recognition of sufficient future taxable income in specific tax jurisdictions in which those temporary differences or net operating losses are deductible.

Throughout the year ended March 31, 2025, the Company has been assessing the realizability of its deferred tax assets by considering positive factors such as the next three years’ profit projection making it more likely than not that the Company will be able to recognize a deferred tax asset on losses. Based upon historical performance of the Company, a valuation allowance of 100% was recorded as there is currently no significant evidence to indicate realizability of deferred tax assets. During the years ended March 31, 2025 and 2024, the Company recorded a valuation allowance of 100% of UK and Hong Kong losses.

The Company is subject to US federal income tax, as well as income tax in multiple US state and local jurisdictions and a number of foreign jurisdictions. Returns for the years since fiscal year 2022 are still open based on statutes of limitation only.

14. COMMITMENTS AND CONTINGENCIES

Notice from NYSE* –* On December 17, 2024 the Company received a notification from the NYSE American LLC (the “NYSE”) stating that the Company is not in compliance with the minimum stockholders’ equity requirements of Sections 1003(a)(ii) of the NYSE American Company Guide (the “Company Guide”) requiring stockholders’ equity of $4,000 or more if the Company has reported losses from continuing operations and/or net losses in three of the four most recent fiscal years. As of September 30, 2024, the Company had stockholders’ equity of approximately $2,700 and had losses in its three most recent fiscal years ended March 31, 2024.

The Company is now subject to the procedures and requirements of Section 1009 of the Company Guide. The Company has until June 11, 2026 to regain compliance with the Company Guide. The Company submitted a plan of action to regain compliance with the Company Guide (the “Plan”) on January 10, 2025, which the NYSE accepted on March 4, 2025. Accordingly, the Company will be able to continue its listing during the Plan period and will be subject to periodic reviews including quarterly monitoring for compliance with the Plan until it has regained compliance.

The notification and Plan acceptance has no immediate effect on the listing or trading of the Company’s common stock on the NYSE. The NYSE’s acceptance of the Company’s Plan does not affect the Company’s business, operations or reporting requirements with the U.S. Securities and Exchange Commission.

Legal proceedings* -*The Company is, from time to time, involved in routine legal matters, and audits and inspections by governmental agencies and other third parties which are incidental to the conduct of its business. This includes legal matters such as initiation and defense of proceedings to protect intellectual property rights, liability claims, employment claims, and similar matters. The Company believes the ultimate resolution of any such legal proceedings, audits, and inspections will not have a material adverse effect on its consolidated balance sheets, results of operations or cash flow.

On December 20, 2023, Aspen Skiing Company, LLC filed a complaint against the Company in the United States District Court for the District of Colorado, alleging, among other things, trademark infringement, false association, false endorsement, unfair competition and deceptive trade practices by the Company. The claims relate to the Company’s social media posts of models and influencers in ski gondolas on the mountain owned by Aspen Skiing Company and now discontinued limited edition clothing sold by the Company that included images, which were licensed by the Company from a photographer, of a skier’s rest area in Aspen that Aspen Skiing Company calls the “AspenX Beach Club.” The complaint seeks monetary damages, non-monetary relief, such as an injunction to end the alleged unlawful practices, and attorneys’ fees and costs on behalf of the Aspen Skiing Company. The Company entered into a settlement agreement with Aspen Skiing Company for a de minimis amount during August 2024.

On May 14, 2025, we were named as a defendant in a lawsuit filed in the Superior Court of the State of California in and for the County of Los Angeles Central Judicial District by Amanda Archer and Archer Bytes LLC, a former public relations consultant for the Company. The complaint alleges breach of contract, and other claims and seeks specific damages of $600,000 and unspecified punitive damages. We believe the claims are entirely without merit and intend to vigorously defend the matter.

On April 24, 2025, the Company’s former Chief Executive Officer (the “Former CEO”) commenced ACAS Early Conciliation proceedings (a mandatory step in the UK prior to filing a legal claim) alleging, among other things, unfair dismissal from his position. The Company has not yet been notified that the Former CEO has filed a legal claim with the UK Employment Tribunal.

Capital commitments - The Company had $7,045 of purchase obligations as of March 31, 2025, related to purchase orders to factories for the manufacture of finished goods.

Vendor lien on inventory - Per the terms of one third-party service contract, a lien may be placed on the Company’s inventory if the Company fails to make a payment for services within 30 days from the date the third-party supplier notifies the Company of an outstanding payment. As of March 31, 2025 and 2024, a lien has not been placed on the Company’s inventory in connection with this contract.

15. RELATED PARTY TRANSACTIONS

Two directors of the Company provided consulting and advisory services for the Company totaling $185 and $324 for the years ended March 31, 2025 and 2024, respectively, and are included in selling, general and administrative expenses on the accompanying consolidated statement of operations and comprehensive loss. As of March 31, 2025 and 2024, there were no amounts owed to either director.

Our trade finance facility (see Note 8) was secured by a standby documentary credit for $1,000, which was secured by a guarantee from a company controlled by the Chairman of our board of directors (the “Chairman”) from June 2023 through January 2024. The guarantee accrued interest of 8% per annum from June 2023 through November 2023 and interest of 10.0% from November 2023 through January 2024, payable by the Company. Interest expense for the year ended March 31, 2024 was $56.

The Chairman has provided a $4,000 personal guarantee for the Company’s trade finance facility. The guarantee is a pay-on-demand guarantee securing the Company’s obligations under the trade finance facility, including interest and bank costs, fees and expenses, up to $4,000. The Chairman does not receive consideration in exchange for the personal guarantee.

In March 2025, the Company entered into securities purchase agreements with a company controlled by the Chairman whereby the Company issued 344,797 shares of Series AA Preferred Stock at an original issue price of $5.8005 per share for gross proceeds of $2,000.

16. SEGMENT REPORTING

The following table includes additional information about reported segment revenue, significant segment expenses and segment measure of profitability:

See Note 2 for revenue by geographic location. Long-lived assets, excluding other non-current assets, by geography are summarized as follows:

17. SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated financial statements were issued. Based upon this review, other than as described below or within these consolidated financial statements, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

During May 2025, the Company entered into a business loan and security agreement with the same lender and substantially the same terms as the Term Loans, borrowing gross proceeds of $1,400, net of fees of $70. Thirty weekly payments of principal and interest totaling $66 commence in June 2025.

During May 2025, the Company entered into a consulting agreement for business advisory services under which it issued 100,000 shares of common stock at a fair value of $62, as determined by the closing price on the day of issuance.

During May 2025, the Company entered into a promissory note (the “May 2025 Note”) with a lender controlled by the Chairman of the Company’s board of directors to borrow $500. The May 2025 Note matures on December 31, 2025 and permits the Company to prepay the note in full without penalty at any time. If an Event of Default, as defined in the May 2025 Note, occurs, the outstanding principal and accrued interest becomes due and payable immediately.

In May 2025 we entered two agreements with lenders in which we borrowed gross proceeds of $1,900, $500 of which were pursuant to a note with an entity controlled by the Chairman of our board of directors. Refer to Note 17 to our consolidated financial statements included in Item 8 of this Form 10-K.

On June 30, 2025, the Company closed a public offering of 10,000,000 shares of its common stock at an offering price of $0.30 per share (the “Offering”), pursuant to its registration statement on Form S-3 (File No. 333-285612). The Offering generated gross proceeds of $3.0 million. After underwriting discounts, non-accountable expenses, legal expense reimbursement, and other offering-related costs, the Company received net proceeds of approximately $2,686,850.

In connection with the Offering, the Company issued to ThinkEquity LLC, the representative of the underwriters, warrants to purchase up to 500,000 shares of common stock at an exercise price of $0.38 per share. These warrants are exercisable beginning on the date of issuance and expire five years thereafter. The underwriters were also granted a 45-day option to purchase up to an additional 1,500,000 shares of common stock and/or pre-funded warrants to cover over-allotments, if any. As of the date of this filing, the over-allotment option has not been exercised.

Concurrently with the closing off the Offering, the May 2025 Note was extinguished through the issuance of 1,692,694 shares of the Company’s common stock at a per share price of $0.30.

INDEX TO EXHIBITS

The exhibits listed below are filed as part of this Report on Form 10-K, or are incorporated herein by reference, in each case as indicated below.

• Indicates a management contract or compensatory plan or arrangement.

• Filed herewith

** Furnished herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.